A government quango which rules on whether people should be admitted to hospital for psychiatric treatment has been criticised by a financial watchdog for the way in which it is run.

Robert Black, the Auditor General for Scotland, said the Mental Health Tribunal for Scotland Administration (MHTSA), which employs 80 staff and costs £8.4m a year to run, needed to improve "to meet good governance standards".

In particular, he was critical of the organisation's failure to set up a board to run it. Similar concerns had been raised in 2005-6, the year in which the MHTSA was set up.

Mr Black set out his findings in a report which will be considered today by the Scottish Parliament's Audit Committee.

The report said: "The 2005-6 audit of MHTSA included a review of its governance and accountability framework. This review concluded in August 2006 that appropriate governance was not in place.

"In August 2007, the auditor completed follow-up work on governance there remained a need to improve to meet good governance standards." He added: "There was no formal board in place."

A spokeswoman for the MHTSA said: "Adverts for chairmanship and membership of the board will appear in the press next month, and we would expect the board to be established in February."